Malting Barley Characteristics For Craft Brewers

Gaps Between Craft Brewer Needs and U.S. Malt Supply, and Possible Bridges/SolutionsThe Brewers Association has identified several mismatches and/or disconnects between craft brewer present and future needs,and the U.S. grown barley malt supply and markets. Some of these gaps have to do with barley itself while others have to do withmarket structure and practice. All of these gaps represent potential challenges to near- and long-term craft volume growth as well asopportunities for future medium- and long-term growth of both craft beer volume and all U.S. malt industry stakeholders.FlavorGap: Today’s suite of U.S.-grown barley varieties and the resulting malts has been characterized by craft brewers as being flavorneutral and/or lacking distinctiveness. A number of Brewers Association member craft brewers have indicated that as a result of therecent varietal progression from Klages Harrington Metcalf, the sensory profiles of their flagship brands have evolved over time,drifting towards lower overall flavor impression and/or complexity.As a group, craft brewers typically place a very high conceptual value on “flavor.” Today’s sophisticated beer consumers demanddiverse flavors that can serve to differentiate craft brands from one another; delivering distinctive flavor defines the craft valueproposition. Craft brewers often have diverse flavor preferences for their brands but are not able to articulate specific preferences withrespect to their brands or at a varietal level for two key reasons. No common terminology or lexicon exists to describe the diverse rangeof flavors found in malts from different sources. There is poor understanding of the origins of flavor, whether genetic or arising duringmalting or kilning or from any combination of factors.Bridges: As of today, the Brewers Association is aware of at least three separate research efforts in the U.S. to study and understand theorigins of flavor in barley and malt (there are likely others). They are:Colorado State University – Dr. Jessica PrenniOregon State University – Dr. Pat HayesUSDA ARS National Small Grains Collection (Aberdeen, ID) – Dr. Gongshe HuThese efforts parallel and complement other ongoing varietal development efforts within the industry. These modest first steps arebeing funded largely by craft brewers who for the first time have identified supply gaps, as well as reached a scale that allows forfunding to bridge those gaps. They are also substantially supported by maltsters, growers and grower groups, public sector agriculturalprograms and the academic community.The Brewers Association believes that one primary decider of many within the flavor puzzle lies within the malthouse. Over the past24 months several malting industry experts have stated to Brewers Association staff and members that much or all flavor contained inmalt arises in the malthouse. Perhaps those flavors are inherent to a variety by virtue of genetics. Or perhaps they arise due to somevariety-dependent requirement that drives a malting parameter such as germination time, moisture content or temperature duringgermination, or kiln time or temperature. In any case, exploring how these levers affect malt flavor is crucial to continued innovation inthe U.S. barley malt supply.FANGap: Malt FAN levels are important to all brewers but for very different reasons. FAN deficiencies in wort can lead to poor yeastnutrition and health. Historically speaking, adjunct lager brewers have required malts which contribute relatively high wort FAN.But excess FAN levels in finished beer can significantly reduce product flavor stability. These effects are amplified in all-malt beerproduction. High finished beer FAN levels can result in decreased flavor and biological stability in the package. As all-malt brandscontinue to grow geographically, the amount of time from brewery to consumer increases. High FAN levels in finished beer mean thatover time product stability is threatened. In contrast lower FAN levels in finished beer actually contribute positively to product stability.Larger Brewers Association member craft brewers have indicated that today’s suite of relatively high FAN malts can make it more difficult for thosebrewers to manage the geographic growth of all-malt craft brands.The detrimental effects of individual amino acids on flavor stability was documented at the May 2013 European Brewing Convention34th Congress in Luxembourg by Inaba et al and is the subject of an increasing body of academic as well as craft brewer research.Bridge: The Brewers Association believes development and acceptance of malting barley varieties which include lower FAN levels areimportant for the continued growth of all-malt beer brands. Lower FAN malts will improve product stability and promote continuedgeographic growth of individual all-malt beer brands. While FAN levels will to some degree also decrease with lower total protein andlower enzyme levels, Brewers Association believes that FAN levels should be considered as an important characteristic during varietalbreeding and development.Diastatic PowerGap: As a group, and by design over several decades, the current suite of malting barley varieties grown in the U.S. is predominantlysuited for production of adjunct lager beers. The resulting malts have very high diastatic power (DP) better suited for beers producedwith high proportions of adjunct grains in the mash (e.g., rice, corn) which do not contain their own endogenous diastatic power.Craft beers in general are brewed with all-malt grists, meaning they do not require such high levels of diastatic power in order toconvert during mashing. Rather, high DP levels can actually be problematic to all-malt beer production; such grists are often referred toas “too hot.” High DP grists can be very difficult to control during the mash, perhaps converting too quickly, or converting at variabletimes with small variations in mash temperature, pH or consistency, resulting in worts that overattenuate or attenuate to different3

degrees. Overattenuation results in lower body and mouthfeel of the final product. Brand repeatability can therefore suffer whenbrewing all malt beers with high DP malt.On the other hand, too low DP can result in under attenuation.Bridge: The Brewers Association believes current barley varieties have sufficient enzyme potential and higher levels are not helpful forcraft brewing. In fact, some craft brewers advocate for the development of malting barley varieties with lower DP levels.ScaleGap: The U.S. malting industry is currently highly consolidated, with a relatively small number of very large malting operations(with a few notable exceptions). The scale of such physical plants is such that handling relatively smaller volumes of a larger numberof varieties of barley and the resulting malts is exceedingly difficult, though not impossible. Further, much of the malting capacitydeveloped during the 20th century is currently committed to malt production destined for large brewers either through contracted longterm agreements or outright ownership.Examples of large-size malting features which are scaled for an industry serving a small number of large brewery customers include:storage silos, conveyance equipment, malthouse tanks and packaging and shipping facilities. Many malting facilities lack baggingequipment, and therefore cannot directly serve smaller breweries that don’t use bulk malt. Only 4% of brewing companies under 1,000barrels of annual production use a bulk silo; whereas, nearly all (94%) brewing companies above 8,000 barrels of annual production usea bulk silo. Analysis of 2012 Brewers Association Benchmarking Survey data and 2013 Beer Industry Production Survey data shows thatroughly 22%-25% of U.S. brewing companies use a bulk silo. This means that roughly 75% of U.S. breweries (includes most brewpubsand smaller packaging breweries) use bag malt. By definition these smallest producers as a group comprise the lion’s share of totalbrewing companies; confoundingly and paradoxically they produce a very small percent ( 5%) of total U.S. beer production volume.Neither the business opportunity represented by small brewers nor the scale of U.S. malting capacity is likely to remain at currentlevels. Currently, both are changing dramatically and rapidly.Bridge(s): The Brewers Association anticipates that existing malting companies will over time respond to rapidly evolving marketrequirements by adding binning, handling and packaging capacity scaled to process and produce smaller volumes of a larger numberof malting barley varieties. The Brewers Association also anticipates continued growth in the number and geographic spread ofrelatively small scale malting companies ( 500 tons annual capacity) producing malt for relatively small brewery customers. As of early2014 at least 16 are operational; of these, 8 opened between 1998 and 2010, while the other 8 opened in 2011 or later. At least another 7such companies are also under construction as of early 2014.Custom ContractingGap: The U.S. hop industry operates primarily by a custom contract business model. That is, brewers contract with dealers and growersto produce the hops they consume for beer production. This arrangement is one of necessity; because the brewing industry uses greaterthan 98% of hops grown, hops are by definition a very small industrialized crop. Growers typically will not produce hops without abrewer executed purchase contract because there is virtually no other market to sell into. Granted there is a small spot market for hops,but the vast majority of the U.S. hop crop is produced and sold under custom contract. Brewers, dealers and growers are all accustomedto custom contracting for hops. Contracting has served the hop market well in terms of grower surety of demand, as well as brewersurety of supply as well as variety. Craft brewers in particular continue to benefit from a diverse supply of aroma hop varieties inparticular which they use to produce unique craft beer brand flavor and aroma profiles. Custom contracting has allowed for tremendousinnovation in especially unique aroma hop varieties precious to craft brewers and consumers. In a very real sense innovation and diversity in the hopmarket has fueled craft beer brand and volume growth.The barley market differs from the hop market in many fundamental ways, including for example the number of producers (thousandsof U.S. barley growers vs. several dozens of U.S. hop growers) and the number of varieties (a few tens of U.S. malting barley varietiesvs. nearly 200 hop varieties grown used by brewers worldwide). In the past when barley was used in several industries such as food,feed, export and brewing, the barley market could be characterized as a commodity market, and in this way differed considerably fromthe hop trade. Today however barley production continues a steady decline which began in the 1940s; the brewing industry has becomethe predominant consumer of U.S.-grown barley. The barley market is becoming increasingly concentrated in the brewing industry, andincreasingly resembles the hop market in this important respect.The largest few hundred U.S. brewers are able to contract for their barley malt either with dealers, maltsters or direct with growers.Barley grown under contract is malted and transported to brewers typically by rail or truck and blown into silos. The other 2,000 or sobrewing companies purchase barley in bags or supersacks, typically on the spot market (with a few notable exceptions). Purchasing onthe spot market leads to far less supply surety, less assurance of critical malt performance parameters which are typically enumeratedin contract terms and importantly far less control over price fluctuations. In this sense many breweries remain relatively vulnerable tothe vagaries of Mother Nature and global demand for barley malt with less access to many of the tools their larger brethren employ tomanage risk.As a rule of thumb, malt dealers have preferred to custom contract with brewers over 20,000-25,000 barrels of annual production,although BA understands that currently breweries having at least 8,000 barrels of annual production typically use bulk silos. Managingconversations between thousands of growers and thousands of brewers is a complex business model which malt dealers have notexperienced historically; one important and unfortunate outcome is that smaller brewers have heretofore not been able to communicatetheir needs to maltster and grower. The supply diversity benefit arising from direct brewer - grower communication realized in the hop4

market is therefore largely missing from the barley market. Among several other factors this missing communication link has generallyslowed the pace of malting barley variety acceptance industry-wide, since only a small proportion of brewers are able to engage incustom contracting.Bridge: The Brewers Association believes that all U.S. malting barley stakeholders will benefit from increased custom contracting bybreweries of all sizes. Contracting will provide surety to growers and maltsters as they undertake the important process of increasingth

early 2014 craft beer volume accounted for roughly 7.8% of total beer volume in the U.S.; but craft brewers consumed over 25% of the malt used by all U.S. brewers, a factor of roughly 3.4x. Sources for